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Alcoa (AA) Surges 8.5%: Is This an Indication of Further Gains?

Alcoa Corporation (AA) shares rallied 8.5% in the last trading session to close at $35.63. This move can be attributable to notable volume with a higher number of shares being traded than in a typical session. This compares to the stock's 5% gain over the past four weeks.

Alcoa’s rally is largely driven by optimism over the growth in aluminum consumption with end-market recovery. Improvement in the shipment volume for aluminum and alumina on higher demand, coupled with increase in their prices, is likely to boost its operational performance in the quarters ahead. For 2021, the company’s Aluminum segment expects sales of its value-add products to grow in double digit on year-over-year basis.

Price and Consensus

This bauxite, alumina and aluminum products company is expected to post quarterly earnings of $0.92 per share in its upcoming report, which represents a year-over-year change of +4700%. Revenues are expected to be $2.61 billion, up 21.4% from the year-ago quarter.

Earnings and revenue growth expectations certainly give a good sense of the potential strength in a stock, but empirical research shows that trends in earnings estimate revisions are strongly correlated with near-term stock price movements.

For Alcoa, the consensus EPS estimate for the quarter has been revised 112.8% higher over the last 30 days to the current level. And a positive trend in earnings estimate revision usually translates into price appreciation. So, make sure to keep an eye on AA going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank 1 (Strong Buy). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

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